Heads Up: New Proposed Grant Restrictions on Use of Certain Chinese Products and Services

  • January 30, 2020

OMB Proposes Guidance Implementing Grant Provisions of Section 889(b) of 2019 NDAA

This is a repost of an article written by Akin Gump Strauss Hauer & Feld LLP. See the article in its entirety HERE.

Key Points

  • On January 22, 2020, the Office of Management and Budget (OMB) proposed changes to its grants and agreements regulations (2 CFR Part 200) to implement § 889 of the National Defense Authorization Act (NDAA) for 2019, which prohibits the procurement and use of certain “covered telecommunications equipment and services” produced by Chinese companies—Huawei, ZTE, Dahua, Hikvision and Hytera (and any affiliate or subsidiary thereof).
  • OMB’s proposed regulations would create 2 CFR 200.216, providing that “Grant, cooperative agreement, and loan recipients are prohibited from using government funds to enter into contracts (or extend or renew contracts) with entities that use covered technology.” According to OMB, the prohibition “applies even if the contract is not intended to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services.”
  • The guidance reflects a broad interpretation of § 889’s grant and loan-related statutory prohibition, and it may signal the Trump administration’s intention to pursue a similarly broad approach in its forthcoming rulemaking implementing procurement regulations under § 889(a)(1)(B), which will also become effective August 13, 2020.
  • If implemented as written, the prohibition could have significant ramifications for recipients of federal grants, cooperative agreements, and loans, as well as their sub-recipients and suppliers. Companies and institutions with potential exposure to § 889 should consider filing comments with OMB by March 23, 2020.

Recommendations

Entities that receive federal grants, cooperative agreements or loans, and those who contract with such entities, should undertake an assessment of their exposure to § 889 and the potential consequences of OMB’s proposed rule on their existing and future federal awards. Affected entities should consider filing comments with OMB, as this feedback will be of critical importance not only in generating guidance on as-yet-undefined terms and requirements in the final regulation(s), but also potentially with respect to any forthcoming amendments to the FAR implementing § 889(a)(1)(B).

Read more about the proposal here: https://www.federalregister.gov/documents/2020/01/22/2019-28524/guidance-for-grants-and-agreements

Guidance for Grants and Agreements

The Office of Management and Budget is proposing to revise sections of Title 2 of the Code of Federal Regulations (CFR) Subtitle A-OMB Guidance for Grants and Agreements. The proposed revisions are limited in scope to support implementation of the President’s Management Agenda, Results-Oriented…

Reminder: This is a repost of an article written by Akin Gump Strauss Hauer & Feld LLP. See the article in its entirety HERE.


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